Lenders to get easier access to information on borrowers

Cibil chairman M.V. Nair said the tie-up with the central registry of Securitisation Asset Reconstruction and Security Interest of India will reduce costs for banks and housing finance firms. Photo: Hemant Mishra/Mint

Updated: Tue, Dec 04 2012. 01 17 AM IST

New Delhi: Lenders will soon be able to access information on the credit worthiness of a borrower and check whether a property has already been mortgaged, tapping a single source.

The central mortgage registry and Credit Information Bureau (India) Ltd (Cibil) have formed a partnership to jointly provide access to banks and financial institutions to data related to credit worthiness of a borrower in an effort to curb rising property loan fraud and bad debts.

The central registry of Securitisation Asset Reconstruction and Security Interest of India (CERSAI) and Cibil signed an agreement on Monday to synchronize their websites. Lenders who log on to the website of CERSAI will get access to information available with Cibil as well.

“While CERSAI has information regarding mortgages, Cibil has information regarding the borrower,” said R.V. Verma, chief executive and managing director of CERSAI. “Both together can provide a lot of synergies, which will lead to more efficient pricing by the lenders.”

CERSAI, an electronic registry which maintains records of all properties that are mortgaged with banks or other financial institutions, was launched in April last year as a Section 25 company to prevent fraudulent multiple borrowings against the same property. A Section 25 company is a not-for-profit company registered under the Companies Act.

The database of Cibil, the country’s largest collector of data on borrowers, is used by banks and other financial institutions to check the loan repayment record of a borrower. A borrower with a good Cibil score is more likely to get loans from banks and that too at competitive rates.

While Cibil has information on 210 million records, CERSAI has a record of 7.5 million transactions where a property is mortgaged.

M.V. Nair, chairman of Cibil, said the tie-up will reduce costs for banks and housing finance companies.

“At present, information gathering about borrowers and security is an expensive process. If correct information is not available, it could lead to a wrong decision by the lender,” Nair said.

Bank credit to housing as on 19 October was at Rs.4.28 trillion, a rise of 12% from a year earlier, according to data available with the Reserve Bank of India.

The scope of the central registry, which is restricted to immovable properties in the housing and commercial real estate segments, will be expanded to cover factoring also, said Verma.

The registry is also looking to bring under its ambit the entire portfolio of existing mortgages and is in talks with cooperative banks and some non-banking financial companies to make them register their records with CERSAI. Currently, around 95% of the mortgages are covered under CERSAI, Verma said.

Under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, it has been made mandatory for banks and other lenders to file details about mortgages with CERSAI.

“This will bring down the operational costs to some extent. But more than costs, it is the convenience that a lender can check the sale details of a particular property and the previous history of default of a borrower through one website,” said Maneesh Srivastava, chief executive of Muthoot Housing Finance Co. Ltd. “It will help avoid potential credit losses in the future.”